Security law looks ready for approval
( 2003-10-25 00:52) (China Daily)
The long-expected draft on securities investments, undergoing its third review, at the fifth session of the 10th National People's Congress, is likely to pass next Tuesday.
The draft law -- started in 1999 and known as the law on securities investment Fund -- is the first in China to regulate the nation's new securities fund industry.
According to NPC sources, the third version of the draft clarifies the rights of funds holders to bring lawsuits against funds managers, funds trustees or funds-offering institutions if infringements occur against the legitimate interests or rights of the investors.
"The right to bring a suit is very important to protect the interests of investors, and the draft pays much attention to clarify the civil liabilities and rights of funds managers and companies,'' said Wang Yiming, a member of the NPC's Law Committee. "This would plug present loopholes.''
Legal experts point out that the current Securities Law pays scant attention to the civil liabilities of listed companies that cheat investors, and also fails to stipulate the rights of shareholders to bring a suits or lodge administrative complaints.
Wang said the third version of the draft also makes a major change to the issue of whether open-ended funds can apply for short-term loans from commercial banks.
Open-ended funds, different from close-ended ones, can be bought and redeemed by investors based on their developing needs.
The second version of the draft stated that funds management companies are allowed to apply for short-term loans when many investors ask to redeem their funds at the same time.
However, some legislators disagree with that and argue that the current segregated regulatory system of securities, and banking and insurance industries, prohibit the three from investing in one another. , They say the flow of banking funds may foment risks in the securities industry.
Since open-ended funds have existed in China for only a short time, Wang said his committee so far lacks enough experience to give a final answer on the issue, so the former clause in the second version was deleted.
"The current draft does not stipulate whether open-ended funds can apply for short-term loans from commercial banks, which leaves space for further amendments according to the developing needs of our situation,'' said Wang.
Zhou Zhengqing, former chairman of the China Securities Regulatory Commission and now a member of the NPC Financial and Economic Committee, said an early enactment of the law would lay a solid legal basis for the fund industry in China, which is in an expansion phase and embracing more foreign participants as the country's financial markets open wider.
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